The State Bank of Pakistan (SBP) executed a significant liquidity infusion into the national financial system today through both conventional reverse repo operations and Shariah-compliant Modarabah-based Open Market Operations (OMO), cumulatively injecting around Rs10.78 trillion. This strategic move is designed to address immediate liquidity requirements within the banking sector, ensuring operational stability and market efficiency.
Under the conventional OMO framework, the SBP deployed Rs10.56 trillion through reverse repo instruments. These operations spanned multiple tenors, including 7-day and 14-day maturities, providing banks and primary dealers with access to substantial funding against eligible collateral such as Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs). The 7-day reverse repo saw Rs368 billion accepted at a rate of 11.02 percent, while the 14-day tenor accounted for Rs1.895 trillion accepted at 11.01 percent. Overall, the conventional OMO injections totaled Rs10.568 trillion, reflecting the central bank’s active management of short-term liquidity needs in the system.
In parallel, SBP injected Rs212 billion through Shariah-compliant Modarabah-based OMO, structured under the Bai-Muajjal framework to support liquidity in Islamic banking channels. The 7-day reverse repo accepted Rs200 billion at 11.04 percent, while a 14-day tenor of Rs12 billion was settled at 11.06 percent. The use of GOP Ijara Sukuk as eligible securities for these transactions illustrates SBP’s commitment to providing tailored liquidity solutions for Islamic banks and specialized windows of conventional banks.
Open Market Operations remain a critical monetary policy tool for SBP, allowing the central bank to either inject liquidity into the banking system or mop up surplus funds, depending on market conditions. During injection operations, SBP lends funds to banks and primary dealers against approved government securities to address temporary liquidity shortages. Conversely, OMO mop-up operations involve the sale of MTBs or PIBs to banks in exchange for liquidity, thereby controlling excess money supply in the system.
The dual approach of conventional and Shariah-compliant OMO ensures that both conventional and Islamic banking institutions have access to the funding required to maintain smooth operational functionality. By strategically timing these injections, SBP seeks to stabilize interbank liquidity, facilitate efficient financial transactions, and support the broader financial system’s resilience.
This massive Rs11 trillion liquidity operation is expected to have a stabilizing effect on short-term interest rates and improve market confidence. By providing immediate funding support, SBP helps banks maintain lending capacity, meet regulatory liquidity requirements, and respond effectively to business and consumer demand. Such interventions are critical in Pakistan’s dynamic economic environment, especially given ongoing fiscal pressures and market volatility.
As the central bank continues to leverage OMOs to manage liquidity, both conventional and Islamic financial institutions benefit from structured, transparent, and timely access to funding. These operations underscore SBP’s proactive approach to monetary policy and its commitment to maintaining a robust and resilient financial ecosystem.
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